The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.

The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.

How Replacement of "Firewalls" with Operating Standards Affects Inspections

To All Section 20 Subsidiaries of Bank Holding Companies, and Others Concerned, in the Second Federal Reserve District:

Our Circular No. 10979, dated September 4, 1997, contained an announcement by the Board of Governors of the Federal Reserve System of modifications to the prudential limits ("firewalls") that had applied to bank holding companies engaged in securities underwriting and dealing activities through section 20 subsidiaries. The Board eliminated those restrictions that had proven to be unduly burdensome or unnecessary in light of other laws or regulations, and consolidated the remaining restrictions in a series of eight operating standards. One of the standards was recently clarified, in our Circular No. 11049, dated April 17, 1998.

In response to questions raised by banking organizations concerning the ramifications of these changes and their effect on inspections of section 20 subsidiaries, the Federal Reserve has adopted guidelines on the impact of these modifications on inspections. The guidance was developed by a group consisting of staff from the Federal Reserve Bank of New York led by James Keogh, Examining Officer, and Board staff. The letter (SR 98-6) from the Board's Division of Banking Supervision and Regulation contains the guidance and discusses certain recurring issues that have been raised. Questions may be directed, at this Bank, to James Keogh.